Free consult & free copy of book

E-Myth – “Why most small businesses don’t work & what to do about it”

Contact Us


Most 5 star CPA Google reviews in Canada

Read Reviews

Chartered Professional Accountants E Myth

1 Fixed Monthly Fee - Planning | Accounting | Taxes | Consulting

Helping Canadian businesses beat the odds!

Accounting Outsourcing | Are Audited Statements Required For Loans

50% of all business owners fail within five years, 29% of those failed business owners say that running out of money was the reason why their business failed says accounting outsourcing. Often, entrepreneurs need to secure loans in order to help them operate their business. Whether it is for growing their business, or helping them out of a cash crunch, itís extremely important that entrepreneurs understand what they need in order to secure a loan long before they need to apply for those loans.

Understanding the difference between all of the different financial statements can help entrepreneurs when they first approach a bank to qualify for a loan. The first type of financial statement is the most common and is the notice to reader financial statement. This has been verified by the accountant as arithmetically correct, which means the numbers are plausible. It takes the least amount of time to repair, and that is reflected in its price. The second type of financial statement is the reviewed financial statement. The accountant will test the reasonability of the numbers in order to ensure that the numbers are believable. This type of financial statement takes more time than the notice to reader, and is reflected in the price as well. Accounting outsourcing says that audited financial statements are by far the most time-consuming to reduce because not only does the accountant have to verify the numbers, theyíre actually going to confirm that the numbers are exactly correct. They will confirm with banks that the numbers are correct and, with customers that owe money, that they owe that amount, and that amount of money is still going to be coming back to them. It takes a significant amount of time, and is also reflected in the price. It can be extremely cost prohibitive due to the amount of due diligence that goes into preparing it says accounting outsourcing.

Many business owners believe that because the review it or audited financial statements are more expensive, and take more due diligence to prepare, that they are better. Accounting outsourcing says that this is not necessarily the case, just because they have more time convenient to verify the numbers are correct, doesnít mean they are better. An accountant that is working on reviewed audited financial statements, their fiduciary duty is to the external source that is requiring those statements. If itís to apply for a bank loan, the accountant then works for the bank to ensure the numbers are accurate. If it is a nonprofit needing an audited financial you for their Board of Directors, and the accountant works with the Board of Directors. Not only does it not mean that those amounts are better, but because the accountant works for the bank during that time, and they must remain impartial, that also means that the accountant has to remain at armís length from the client says accounting outsourcing. This means that the accountant wonít be able to offer advice, tax strategies, or marketing solutions for that business owner.

Business owners who understand the difference reasons they may be asked to get financial statements done, can start to understand what the most appropriate financial statement is for their need.

Many entrepreneurs will need to apply for loans several times throughout their entrepreneurship says accounting outsourcing. Because of this, they should know what thanks require when it comes to filling out there loan application. Many business owners believe that they need to provide reviewed or audited financial statements because that was a requirement several years ago, but is no longer the case. Banks have recently begun to relax their positions on what kind of financial statement they require for a number of reasons.

The first big reason why banks no longer require reviewed or audited financial statements as accounting outsourcing, is because they also need good interim statements. Banks are starting to discover that it is more important for them to have an idea of how good financially the business is doing currently, rather than in the previous year. Instead of asking business owners to provide financial statements with more testing, they are asking business owners to provide intro statements that have been prepared by their accountant.

The reason why banks would not request business owners to get a reviewed financial statement as well as good interim statements is because itís often difficult or impossible for business owners to provide both. Since an accountant must remain impartial as they are working on audited financial statements says accounting outsourcing, they are not allowed to provide the interim statements for the same client. Remaining impartial and unbiased means that they work only for the bank and not the client. By the bankís relaxing the need to have audited financial statements, is that a business owner can get their accountant to provide notice to reader financial statements as well as accountant prepared interim statements says accounting outsourcing. This way, the bank and get all of the information that they need to verify the financial health of the business.

If an entrepreneur has been asked by their bank to provide audited financial statements as well as interim statements, rather than try to find an independent accountant separate from their current chartered professional accountants, they should approach their accountant with this challenge, and asked their accountant if they work closely with another accountant that would be happy to work on their interim statements all their accountant is working on their financial audited financial statements. This way, they will have reasonable assurance that their accountant is working with someone that they know and trust, and if the other accountant has any questions, they will be able to asked them very easily.

By understanding exactly what is needed in loan applications, entrepreneurs can get exactly what they need in order to qualify for the loans, without going through unnecessary financial hardship in order to provide that.